The website of the Central Commission for Discipline Inspection is deeply concerned: the dollar hegemony of harvesting the world's wealth

Central Commission for Discipline Inspection State Supervision Commission website Guan Xiaopu

Since the Russian-Ukrainian conflict, the United States and its allies have imposed unprecedented sanctions on Russia, including freezing the official reserve assets of the Central Bank of Russia, private assets of entities or individuals in these countries, and even kicking some Russian banks out of the Global Interbank Financial Communications Association (SWIFT) system. In this game, Russia threw out the "hand-off" of "settling gas in rubles and anchoring rubles with gold", and the financial war escalated again.

In recent years, a growing number of countries have expressed the need to move away from dominance over the dollar, which has gone from being an ordinary instrument of payment, settlement and investment to a political blackmail tactic in Washington. The status of the dollar is being questioned by the international community.

The abuse of financial sanctions by the United States will incentivize some countries to adopt de-dollarization strategies

"We've seen that some countries are renegotiating trade settlements in which currencies." Gopinat, the first vice president of the International Monetary Fund, said a few days ago that the financial sanctions launched by the West against Russia after the Russian-Ukrainian conflict may weaken the dominance of the US dollar and lead to a more "fragmented" global financial system.

In an exclusive interview with the Financial Times, Gopinat said that Western sanctions, including the imposition of relevant restrictions on the Russian central bank, may promote the formation of small currency blocs based on trade in some countries. The greater use of other currencies in global trade will lead to a further diversification of reserve assets held by central banks, which may play a greater role as a result. She added that the Russian-Ukrainian conflict will also stimulate the development of digital finance, including cryptocurrencies and central bank digital currencies.

Since 2014, Western countries led by the United States have launched multiple rounds of economic and financial sanctions against Russia in an attempt to isolate Russia from the world economy and the international financial system. The International Finance Association released a research report on February 28, pointing out that the economic and financial sanctions imposed by the United States on Russia can be divided into three stages:

In the first stage, after the Crimean crisis in 2014, the United States and the European Union imposed a number of economic and financial sanctions on Russia, focusing on the financial, energy and defense industries in order to achieve precision strikes against Russia.

In the second stage, from 2017 to 2021, the United States took several rounds of unilateral economic and financial sanctions against Russia on the grounds that Russia was suspected of interfering in the US election, launching a "malicious cyber attack" against the United States, and poisoning of former Russian agents in the United Kingdom. This mainly includes sanctioning a number of Russian economic oligarchs and their controlled enterprises and enterprises participating in the "Nord Stream-2" project, restricting the purchase of Russian government bonds by US financial institutions, and freezing the assets of sanctioned Russian individuals and entities in the United States.

In the third stage, after Russia's military action in Ukraine in February this year, the United States and other Western countries significantly escalated sanctions against Russia. This mainly includes freezing the assets of large Russian state-owned financial institutions in the United States, restricting Russia's ability to use dollars, euros, pounds and yen for commercial transactions, excluding some Russian banks from the SWIFT payment system, freezing the assets of the Russian central bank and prohibiting transactions with the Russian central bank.

The International Finance Association pointed out that in order to weaken the effect of US sanctions, Russian financial institutions and enterprises have significantly reduced foreign currency debt since 2014, and the Russian central bank and sovereign wealth funds have also significantly reduced their holdings of US Treasury bonds and US dollar assets to increase gold reserves. At the same time, Russia has developed a local version of the Financial Information Transmission System (SPFS) to partially replace the SWIFT payment system, actively seeking trade settlement in rubles and other currencies.

Julia Friedland, a senior researcher at the Atlantic Council, warned that the "top- and most top-" economic sanctions imposed by the United States on Russia will not only directly impact the Russian economy and Central and Eastern European countries with close economic ties with Russia, but also have a devastating impact on global macroeconomic and monetary stability.

In the long run, the abuse of financial sanctions by the United States will incentivize some countries to adopt de-dollarization strategies. Since the birth of the euro, dollar assets as a share of global central bank foreign exchange reserves have fallen from 71 percent to 58.81 percent in the fourth quarter of last year, a 26-year low, according to the International Monetary Fund. This indicates that central banks are gradually reducing their holdings in the US dollar.

Power supports the dollar's hegemony, and wanton behavior will also damage the dollar's credit

The buyer bought a Nikon camera worth hundreds of thousands of yen in Akihabara, Tokyo, Japan, and although it may have been printed "Made in Thailand," he ended up with a credit card bill denominated in U.S. dollars. The whole process of consumption seems to have nothing to do with the United States, but the dollar is "uninvited" and demands to dominate the cross-border deal.

This is the privilege of the dollar. For more than half a century after World War II, the U.S. dollar has been the most important currency used for quotations and settlement of international transactions. No currency has seeped into the blood of the world economy like the dollar.

Gold and silver are naturally not money, but money is naturally gold and silver. From shells, copper coins, etc. to gold and silver, from the paper money intercourse that appeared in the Song Dynasty of China to the pegging of paper money and gold, with the development of social and economic development, the form of money is constantly changing. In today's era of credit money, the right to issue money depends entirely on the credit and economic strength of the country, that is, a country can issue currency according to the market and the needs of the country.

The United States was founded for a short time and did not go through the whole process of changing the shape of the currency. Looking back at the process of the evolution of the US dollar, it began as gold for international trade, and in 1944 it became the gold dollar, that is, the US dollar was pegged to gold, and the currencies of various countries were linked to the US dollar, achieving "double pegging" or "double pegging"; after the disintegration of the Bretton Woods system in 1971, the US dollar was bound to oil, which became a petrodollar to a certain extent, essentially becoming a credit dollar, supported by the credit of the Us state; and developed to the last ten years, the US dollar became a debt dollar. At present, the total debt of the US federal government has exceeded $30 trillion.

The United States is the only large economy that has the ability and willingness to absorb global excess savings and embrace the corresponding trade deficit. The surplus countries take the accumulated dollars to buy U.S. debt, which is equivalent to the producer providing financing to consumers, the United States borrows money from the surplus country to buy its products again, and the surplus country takes the earned dollars to buy the US debt again. So back and forth, with the dollar hegemony in hand, the United States created more and more deficits and debts, nourishing the greed of American capital.

Today, the dollar has been repeatedly used to strengthen economic sanctions on other countries, and has been criticized by the market as an "abuse" of its dominant position and a crackdown on the credit of the dollar. In fact, the power of the United States has supported the hegemony of the dollar, but the arbitrary behavior of the power is also hurting the dollar's main reserve currency advantage.

If from 1944 to 1971, international consensus and conventions gave the dollar legitimacy, it was followed by the hegemony of the dollar created by the United States itself. On August 15, 1971, then-US President Richard Nixon announced that the U.S. dollar was no longer pegged to gold and that the world's currencies were no longer pegged to the U.S. dollar. This was a major, public breach by the United States against the nations of the world, which directly led to the disintegration of the Bretton Woods system, and the currencies used in international trade settlement and national reserves became credit currencies.

This was followed by the outbreak of the Fourth Middle East War in 1973, followed by an oil crisis and an economic crisis. As the world's largest oil importer, the United States first reached an agreement with Saudi Arabia, the largest oil producer, to settle oil in US dollars, and then reached an agreement with the Organization of the Petroleum Exporting Countries to bind the oil trade settlement currency to the US dollar, thus establishing the hegemony of the US dollar.

Behind every major crisis is the shadow of the dollar, and the dollar has become the "harvester" of world wealth

The Fed has recently released signals to raise interest rates, and US stocks have risen in response. The influx of foreign capital into the US stock market to hedge risks is likely to be turbulent in emerging markets. This means that the old script of using the dollar hegemony to "cut leeks" is once again played out - the Fed cuts interest rates, emerging markets borrow a lot of dollar debt, and the economy is prosperous; once interest rates are raised, capital flees, bubbles burst, and emerging markets are in mourning. If this emerging-market country unfortunately has a depreciated local currency and owes an appreciating foreign currency, the ensuing debt crisis will almost be ruined...

"The dollar is our currency, but it's your problem." This is the famous quote of former U.S. Treasury Secretary John Connery, and there is arrogance between the lines. Former French President Charles de Gaulle was even more to the point: "The United States enjoys the super privileges created by the dollar and the deficit without tears, and she uses worthless waste paper to plunder the resources and factories of other peoples." ”

It is a unique and distorted monetary phenomenon: the dollar is neither gold nor physical, but can be exchanged for goods and services of equal value to the value of printed currency. The U.S. Mint "produces" a hundred-dollar bill for only a few cents, but for other countries to get a hundred-dollar bill, they must provide tangible goods and services worth the equivalent of $100. The "white wolf with empty gloves" is the benefit of the so-called "seigniorage tax" of international currencies.

The dollar repatriation mechanism is also one of the magic weapons for the United States to "harvest" the world. Chen Wenling, chief economist of the China Center for International Economic Exchanges and deputy director of the Academic Committee, pointed out that on the one hand, the world trade settlement and reserve currencies are all using the US dollar; on the other hand, the United States issues US treasury bonds to the world, so that a large number of US dollars return to the United States, forming a large cycle of internationalization of the US dollar, which includes the hot circulation formed by the depreciation of the US dollar and the release of water from the currency, as well as the cold circulation formed by the appreciation of the US dollar and the shrinking of the US debt balance sheet. After the 2008 financial crisis, the issuance of US Treasury bonds exceeded $10 trillion for the first time, thus quickly passing on the domestic financial crisis, and the impact spread to the whole world.

The Latin American economic crisis of the late 1970s, the Asian financial crisis of the late 1990s, and the international financial crisis that erupted from the United States in 2008, every major crisis has the shadow of the us dollar behind it. At the same time, the United States has changed from the world's "largest creditor" to the "largest debtor" and from an international trade surplus to a deficit country.

"When the dollar is disconnected from the Bretton Woods system and can be determined by national credit, the United States becomes a predator who relies on the strength of the dollar, the strength of the American economy, the strength of the American military, the strength of the ability to innovate, and the plunderer who deprives other countries of their wealth by printing money." Chen Wenling said that the US dollar is like a wild horse that has lost its reins, and under the support of US hegemony, it has gradually become a "harvester" for harvesting the world's wealth.

"Not only does the United States receive seigniorage revenue worldwide, but it also gains pricing power over major industrial raw materials, including oil, through financial markets. The United States also uses the base currency characteristics of the US dollar to periodically use the rise and fall of the dollar value and the level of interest rates to grab the economic interests of other countries in the world. Wang Xiaosong, a researcher at the Xi Jinping Institute of Socialism with Chinese Characteristics for a New Era at Chinese University and a professor at the School of Economics, said.

Boasting that it has the hegemony of the dollar, the United States has acted arrogantly and often imposed financial sanctions on other countries. After the outbreak of the Russian-Ukrainian conflict, the United States used a "killing move" against Russia, kicking Russia out of the SWIFT system in an attempt to destroy its economy. For potential adversaries that threaten the status of the dollar, the United States even resorts to military strikes to weaken.

At the beginning of the birth of the euro in 1999, the United States launched a war against Kosovo, the hinterland of Europe, hitting the confidence of international capital in the euro; in 2003, Iraq announced that it would switch to the euro to settle the oil trade in the oil trade, and the United States, which was touched by interests, launched the Iraq War on the grounds of weapons of mass destruction. In recent years, the United States has implemented the "America First" strategy and abused dollar hegemony and financial sanctions, making the demand for "de-dollarization" of various countries more and more intense.

China should accelerate the construction of a global trade center, financial center, manufacturing center, factor trading center and innovation center

Barry Essengreen, a professor at the University of California, Berkeley, said in his book "Arrogant Privilege: The Rise and Fall of the Dollar and the Future of Money" that the United States' not-so-good international reputation and irresponsible international financial measures have made other countries full of doubts about the dollar. As the global political and economic situation evolves, the world of the future will be a world in which multiple international currencies coexist, and the traditional basis of the dollar monopoly privilege is gradually being eroded.

The reform of the monetary system will be a very important part of the century-long changes, especially in the economic changes. In this competitive game, what should China do? Chen Wenling believes that the financial sector will have great achievements, and the key lies in giving full play to the basic and supporting role of modern finance in the overall situation of modernization. Accelerate the construction of global trade centers, financial centers, manufacturing centers, factor trading centers and innovation centers.

Becoming a global trade center can gradually expand the proportion of the renminbi in international trade currency settlement and international currency reserves. International trade events such as the Expo, the Canton Fair, and the Service Trade Fair, as well as more than 100 national cross-border e-commerce comprehensive test zones, China already has the basic framework to become a world trade center and will become a super-large-scale market for global trade.

At present, Hong Kong, Beijing, Shanghai, Shenzhen, Chongqing and Hainan all have the basic conditions to develop into international financial centers, and Tianjin, Wuhan, Chengdu, Xi'an and other cities are expected to build regional financial centers. Continue to improve the RMB global settlement and clearing system, and through the innovative financial support system, help the new development pattern with the domestic large cycle as the main body and the domestic and international dual cycles promoting each other.

China's manufacturing output accounts for about 30% of the world's output value, with the world's most complete industrial system. Financial support will help China's manufacturing industry become a global manufacturing center, become the most complete place in the global production supporting capacity, make more enterprises become single champions, hidden champions, and support the high-quality development of the manufacturing industry.

At the same time, finance should increase support for the reform of factor markets, including labor, capital, data, land, etc. In promoting the reform of the factor market, it is necessary to promote the transformation of data resources into production factors, promote China's digital transformation, and create conditions for the transformation of business formats under the conditions of the digital economy.

In the overall situation of China's modernization drive, innovation is in the core position and is the most important strategic choice to occupy the commanding heights. Building more places into talent highlands, knowledge highlands and innovation highlands requires financial support and financial provision of high-quality institutional supply. Only when China becomes an innovation hub can finance play its multiplier effect.

As an international currency, it is not only super privileged, it should also assume corresponding international responsibilities, otherwise it will be gradually abandoned. At present, some economies continue to try to break away from the hegemony of the US dollar, abandon the exchange rate system that is pegged to the US dollar, reduce the us dollar's foreign exchange reserves, accelerate the development of digital currencies, and protect monetary sovereignty. In 2020, France, Germany and the United Kingdom completed their first transfers with Iran through the Trade Swap Support Tool (INSTEX) to allow Europe to export medical goods to Iran.

China's international influence, status as a great power and national institutional advantages are increasingly recognized by the world. With the improvement of China's international status and the credit of major countries, the international status, international influence and international recognition of the renminbi will be greatly enhanced, and the internationalization of the renminbi will be accelerated.

Source: Website of the Central Commission for Discipline Inspection and the State Supervision Commission